BMA sees third straight budget shortfall
The Bermuda Monetary Authority recorded a budget deficit of $2.55 million last year, its third consecutive annual shortfall, and the seventh in the past decade.
It has previously covered budget shortfalls from its general reserve, and last year the reserve shrank by $2.5 million to $17.2 million. The reserve is now at its lowest level since 2003.
The BMA increased its staff numbers by 19 during 2019, to end the year with 215. The authority said the increase was necessary to support the broadening scope of its supervisory mandate. The staff headcount is expected to remain relatively flat this year, as staffing levels are said to be “largely aligned with ongoing regulatory and operational needs”.
Last year, the BMA started a three-year phasing in of wide-ranging fee increases approved by the Bermuda Government. Among those affected by the charges are insurance and reinsurance companies, banks, corporate service providers, trusts and credit unions.
In 2019, the authority’s total revenue improved 14.4 per cent to $55.64 million, mainly due to a $6.14 million increase in revenue contracts from licensees and from supervisory and licensing fees. However, its annual expenses were $58.2 million, about $8 million higher than in 2018. Salaries and employee benefits increased by about $4.8 million. There was also a $1.1 million increase in general expenses.
In its annual report, the BMA said its resourcing focus this year is the continued developing of staff’s technical proficiency, and ensuring adequate resources and skill sets are available to support key regulatory and supervisory initiatives.
It said this will be coupled with the increased use of innovative technology to “increase capacity across the organisation”.
The authority listed its achievements in 2019, which included the Caribbean Financial Action Task Force ranking Bermuda’s anti-money laundering and antiterrorist financing measures among the highest of any peer-reviewed jurisdiction; and the BMA’s support to Bermuda’s measures addressing economic substance requirements that resulted in the island being placed on the European Union’s “white list”.
Jeremy Cox, executive chairman, writing in the report, said the BMA had earned an enviable reputation as an innovative, high-quality regulator. He said: “In 2019, we continued to harness technology, implementing measures such as artificial intelligence to keep operating costs down and further developing our Insurance Regulatory Sandbox, Innovation Hub and framework for digital assets.”
The BMA celebrated its fiftieth anniversary last year, and made donations to more than 20 Bermuda charities, with staff volunteering to carry out activities that benefited some of the charities.
Mr Cox said: “I believe our efforts in 2019, combined with our work over the past 50 years, places the BMA and Bermuda in a strong position.”
He added: “This track record has set us up to face the unforeseen challenges, such as the global emergency we are currently experiencing in 2020.”
The Royal Gazette asked the BMA for a comment regarding this year’s deficit.
A spokesperson said: “The Bermuda insurance industry, in particular, has been impacted by initiatives in the EU and the US, which have required, over several years, extensive enhancements to Bermuda’s insurance regulatory framework. To support this, additional resources were hired to maintain the high standard of supervisory oversight.
“Those decisions, made by successive BMA boards, positioned the BMA to achieve recognition from the EU through Solvency II equivalence and earn qualified jurisdiction status from the US state regulatory body the National Association of Insurance Commissioners. Furthermore, our status with the NAIC received an upgrade through the recent awarding of reciprocal jurisdiction status.”
While Mr Cox said: “The insurance sector is a critical sector for Bermuda and the BMA’s global standing within the EU and the US. Moreover, it is vital to our long-term sustainability as a premier, globally trusted insurance centre.
“Recognising the impact of the 2007-2009 global recession, for several years the BMA did not make any substantial amendments to its fee structure. In 2018, the BMA consulted with the market, and subsequently introduced an amendment to the Bermuda Monetary Authority Act 1969 (and associated legislation) with all changes phased in over a three-year period.”
He said the BMA last year amended its fee schedule to support the further enhancement of its insurance supervision and address the resource needs across key sectors, which were “experiencing global pressures to broaden the scope of the regulatory and supervisory frameworks”.
Mr Cox added: “The amended fee schedule will not only support the operational demands of the BMA but is also intended to ensure its future financial sustainability.”
The BMA must have globally compliant regulatory frameworks, and a highly skilled technical team capable of implementing effective and pragmatic supervision under those regimes, Mr Cox said.
He added: “The statements we provide in our business plans and annual reports highlight our commitment to deliver quality supervision with the top priority of protecting the interest of those buying services from the institutions we oversee. I also encourage readers to review the 2019 Annual Report posted on the BMA website, which provides the detail and context around these numbers.”
This article has been updated to include a response from the BMA
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